November 09, 2009

Bolts of Business Insight May Flash in Pan at Supreme Court; Bilski the Hedger (Update2)

Flyswatter by Rube Goldberg.

You've heard about the genius whose incandescent idea for a new contraption wakes him in the hours before sunup. You'll also recall Edison's cutesy statement that "[g]enius is one percent inspiration, ninety-nine percent perspiration."

Both the burning thought that disturbs the inventor's slumber and the drudgery that produces the pre-dawn bolt have entered the folklore about what our U.S. Constitution calls"Discoveries" that "promote the Progress of Science and useful Arts". We like those people and don't mind if they prosper, even if their royalties cost us more for the stuff we buy.

Which brings us to Bilski v. Kappos, No. 08-964 (U.S.), a case that explores the edges of what sorts of things the geniuses and drudges can get a patent for. The Court heard argument in Bilski today.

Bilski turns on how far Congress went in allowing business "method" or "process" patents. The inventors, who lost below, say patent law permits patenting so long as the inventions don't simply capture "laws of nature, physical phenomena, and abstract ideas" under Diamond v. Diehr, 450 U.S. 175, 185 (1981), but go on to make some "practical application" of such laws, phenomena, and ideas. And they say their method for hedging against the risk of swings in the price of gas and other commodities.

The Federal Circuit in Bilski set a "machine-or-transformation" test for patentability, holding that the Bilski inventors didn't satisfy it. As the WSJ explains, the test requires that a business method/process "must be 'tied to a particular machine or apparatus' or transform 'a particular article into a different state or thing.'"

The fight comes down to a flexible v. rigid standard. The "practical application" test sounds good to Blawgletter's ear. The Federal Circuit's "machine-or-transformation" formulation, on the other hand, makes us think of Rube Goldberg. (Skip to UPDATE and UPDATE 2 to see why neither will likely win the day.)

But the Supremes seem at times to hear music when our ears perceive racket. A 6-3 majority, for example, liked the fuzzy "plausibility" test of Twombly, while we groaned at Twombly's tightening of the federal case filter.

We'll post the hearing transcript when the Court makes it available. We'll take special interest in questions implying worry that the number of business process patent applications jumped from fewer than 1,000 a decade ago to almost 14,000 in 2008. Justices who focus on that may take the leap from the surge in applications to the conclusion that patent trolls will soon bring commerce to a halt by enforcing patents that cover things like typing a blog post. Yikes.

The largest question left unanswered when the one-hour argument was over was whether the Court would go forward and issue a major new ruling interpreting patent law, when the practical result here seemed so evident. Lawyers and judges have invested major resources in the Bilski case, and it does raise a fundamental question that may well need answering. But, when there may well be no formulation of patent law that would salvage the Bilski-Warsaw creation, why bother?